EUR Rallies on Monday
EURUSD is starting the week on a stronger footing with the pair gapping above the 1.0724 level at the open. The move comes in response to news that Marine Le Pen’s far-right party won the most votes in the first round of the French presidential elections, but not enough to secure a majority. Given the National Rally’s plans to increase spending at a time when the French budget is a major cause for concern for the European Commission, yesterday’s results have been seen as a net positive.
EUR Impact
Alongside the economic impact of the results, the prospect of a multi-party government should protect France and the EU from the more nationalist agenda of Le Pen’s party. Fears of a so-called ‘Frexit’ are a major concern should Le Pen’s party win outright power. In that scenario, EUR is likely to come under heavy selling pressure as traders assess the fall-out risk cross the EU. However, with such a majority now looking highly unlikely, the EU should be protected from such an event, maintaining the integrity of the single customs union.
2nd Round Voting
Focus now shifts to the next round of voting on July 7th. The big risk is that far-right supporters will be emboldened by these initial results, leading to a bigger turnout and a bigger show of support. Still, while a NR majority is avoided, EUR should remain supported near-term. particularly if we see any fresh weakness in USD this week.
Technical Views
EURUSD
The pair is potentially carving out a double bottom (higher low) with the rally back above 1.0724. Momentum studies are turning higher here and if price can hold above this level, focus is on a continuation higher and a test of the 1.0937 level next with the bear-channel highs coming in just above.
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